BoE Clearer It May Not Be Able to Offset Brexit Risks

Posted May 12, 2016 by rvillareal

BoE Clearer It May Not Be Able to Offset Brexit Risks[private]

Summary Highlights

• Stressing that the looming EU referendum may already be having some adverse impact on activity ahead of the vote on June 23, the BoE was even more of the view that this may make macro-economic and financial indicators hard to interpret in the next few months. 
• Against this backdrop, there was therefore even less surprise that the Monetary Policy Summary and Inflation Report revealed the committee to be once again unanimous both in terms of a stable Bank Rate and no change to asset purchases.
• The upside risk to inflation from unit labor cost growth is not the only one the BoE is glossing over.  It completely ignores the ever-clearer strength in credit growth, data which actually suggest that companies and households may not be reacting as negatively to Brexit fears as the likes of business surveys would suggest.
• But the clear message from the BoE at this juncture is twofold.  Broad and clearly negative risks from Brexit are very evident as far as the BoE is concerned and should those risks emerge if there is a vote to withdraw from the EU, the UK economy cannot rely on the BoE coming to the rescue!

BoE May 12[/private]